Mineral sector in Ethiopia

Market overview

Ethiopia has diverse and huge untapped mineral resources. This promising potential coupled with improving government policies and regulations has helped the country to appear on the radar screen of international mining investors. Currently, there are 136 companies working on 246 licenses and the number is still growing.

The mineral potential of Ethiopia is not yet fully explored. The few studies undertaken so far by UNDP and others reported occurrences and deposits of gold, tantalum, soda ash, potash, coal, nickel and platinum in different parts of the country.

Gold is Ethiopia's main mineral export, with export values rising more than 100 fold from USD 5m in 2001 to USD 602m in 2012. It has been mined since ancient times, primarily as alluvial or free gold. At present, Ethiopia has a single large-scale gold mine, Lega Dembi, in the southern area of the country. However, this may change soon. Recently, Ezana Mining had secured a large-scale gold mining license from the Ministry of Mines. Nyota Minerals has also applied for large-scale gold mining of its Tulu Kapi project in the Wollega zone of the Oromia Regional State.

Gold exploration activities are also underway in various parts of the country. A UK company, Stratex, had struck a commercial gold deposit in the Afar region. Other mining companies currently prospecting for gold in Ethiopia include: the Brazilian mining giant, Vale, in Konso woreda in south western Ethiopia, ASCOM Mining Plc in western greenstone belt and Aberdeen International Inc in northern greenstone belt.

Of Ethiopia’s mineral potential, perhaps potash has garnered some of the greatest interest. The Canadian mining company, Allana Potash, is to start large-scale potash mining in the Afar Regional State. Allana Potash’s Dallol project has proven sylvinite reserves of 32.97-million tons, grading 28% potassium chloride, and probable reserves of 60.81-million tons, grading 28.8% potassium chloride. Other companies such as the Indian Sainik Potash are also working on potash mines in the Dallol depression.

Ethiopia is the six biggest producer of tantalum in the world. The Kenticha tantalite mine is estimated to contain sufficient deposits to produce as much as 9,000 tonnes of processed tantalum products over more than 15 years. The mine also contains quartz, feldspar, kaolin and dolomite that are sold in Ethiopia for industrial uses.

Other key minerals produced in Ethiopia include gemstones, platinum, cement, salt and gypsum, clay and shale, and soda ash.

Legislative incentives to mining companies include security of tenure, a 2 – 8% production royalty, exemption from customs duty and taxes on mining equipment, guarantees in respect of the right to sell minerals locally or abroad and the availability of dispute resolution procedures, such arbitration.

The Ethiopian government provides guarantees in respect of the opening of a local account in a foreign currency, retaining foreign currency earnings and remittance of profits, dividends, principal and interest on foreign loans out of Ethiopia.

Key opportunities

Ethiopia has a huge potential opportunity for exploration and development of a variety of minerals: it has already identified reserves of gold, tantalum, potash, platinum and copper.

Getting into the market

Four types of licences can be issued by licensing authorities (the Ministry of Mines):– Reconnaissance, Exploration, Retention and Small and Large Scale Mining.

Non-exclusive reconnaissance licence – is valid for up to 18 months and is not renewable. An applicant must show that it has a sufficient financial resources and technical ability to conduct the proposed exploration.

Exploration licence – is valid for up to three years and may be renewed twice for a period of up to one year. The licensee has the right to apply for and be granted a retention licence or a mining licence. Such licensee may remove and transport minerals found during exploration to conduct tests with the prior written approval of the Licensing Authority. After five years the exploration licence must either be dropped or pre-feasibility studies commenced to investigate the economics of developing a mine

Retention licence – is granted for up to three years and can be renewed for up to three years. Applicants must demonstrate the discovery of a mineral which is of a commercial significance and cannot be developed immediately because of adverse market conditions or unavailable processing technologies. The licensee has the right to be granted a mining licence prior to the expiry of the retention licence.

Small and large scale mining licences – are granted to applicants where the proposed work programme is approved, the applicants have access to financial resources and technical ability to conduct the proposed mining operations and the environmental impact assessment has been approved. A small scale licence is valid for up to ten years and may be renewed for up to five years. a large scale mining licence is valid for up to twenty years and may be renewed for up to ten years..

Contacts

Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).

To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team.